eDiscovery – Eletronic tools to detect compliance violations

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24 September 2018

eDiscovery – Eletronic tools to detect compliance violations

Compliance violations are everyday events in many companies, especially in an international context. And they can result in serious damage. Many companies use electronic analysis tools to track them down.

In France the anti-corruption plan, i.e. the Sapin II law, took effect on June 1, 2017, and it provides for a whole catalogue of compliance measures applicable to companies with more than 500 employees doing business in France. According to Dr. Christophe Kühl, partner in the German- French law firm Epp & Kühl, the law makes it mandatory to develop a code of conduct for employees and to introduce a whistleblower system. Employees with the highest risk of corruption and bribery, as well as senior executives, must receive special training. New audit procedures aim to ensure that the company’s accounts do not conceal acts of corruption or bribery. In case of infringement, a fine of up to one million euros can be imposed.

To ensure that companies apply the law, a special anti-corruption agency, the Agence française anticorruption, has been set up. It is entitled to inspect all relevant business documents, check the implementation of the relevant anti-corruption measures on site and also question individuals. Without electronic analysis tools it would be nearly impossible for companies to ensure that employees comply with the code of conduct and to provide the anti-corruption authority with the requested information. The use of eDiscovery tools is not mandatory in France – unlike in the US and the UK. In practice, however, eDiscovery has become an absolute necessity because without it, many requirements of the Sapin II law could not be fulfilled.

Compliance hurdles are particularly high in international business

Where the laws of several countries apply, there are simply more regulations to be wary of. Many managers in companies find it difficult to maintain an overview of the multitude of laws and regulations applicable to cross-border business transactions. The compliance hurdles for companies conducting international business are therefore especially high. This is particularly the case as deliberate violations are more the rule than the exception: According to a recent YouGov survey commissioned by KrolLDiscovery, more than one in two respondents consider it necessary to adapt to local conditions in favour of company success, even if this conflicts with German law. 37 percent even stated in the survey that bribes or small favours are sometimes indispensable for concluding business deals abroad.

Compliance violations can threaten a company’s very existence

An employee who violates anti-corruption guidelines in order to initiate a lucrative business deal in the Far East, for example, can set off a fatal chain reaction. At the end of the day, not only is the business on the local market at risk, but unpleasant investigations could be initiated at home, which would threaten the very existence of the company. The possible severe damage to reputation and loss of trust vis-à-vis consumers should not be overlooked, as it is often a very difficult and expensive endeavor to restore a tarnished reputation. This is especially true in light of the public’s heightened sensitivity to compliance issues based on a large number of prominent cases. “This is particularly applicable to companies that do a large part of their business abroad. That is why precise monitoring of compliance with rules and laws is a must,” says eDiscovery expert Sauro. “Also to be able to react quickly and cooperate with the authorities if needs be.

Dr. Christian Schefold, compliance expert at the international law firm Dentons, also considers the use of eDiscovery solutions in international business transactions indispensable. “The complexity of cross-border investigations is very high, as national laws as well as business practices must be monitored,” says the compliance expert. “The amount of data in companies is increasing exponentially and a great number of different channels have to be considered during an investigation.” According to Schefold, companies can use eDiscovery solutions to collect, screen and prepare for an investigation. “This helps project lawyers to deal with the case quickly and cost-effectively by using artificial intelligence.

Internal investigations are now standard

In order to detect or prevent compliance violations at an early stage, internal investigations have become part of everyday life in many companies. EDiscovery software is essential for filtering out specific content from the tremendous amounts of data that are generated daily in digitalised business operations and for using them as evidence. EDiscovery is already widely used in the areas of litigation, regulation, antitrust and merger control, labor law and arbitration. Companies are also increasingly proactive about using these tools to detect compliance violations and avoid costly legal proceedings and fines. EDiscovery solutions can also provide valuable services in the area of due diligence.

Even if the law does not provide for eDiscovery, the methodology, i.e. the process according to the eDisclosure reference model, which is the standard procedure for electronic disclosure, can be transferred from data collection to the production of data to other forms of investigation,” explains Sauro. One example is for investigations related to antitrust violations. “EDiscovery can be used as a synonym for processing large volumes of data in the context of investigations and is not necessarily bound to US court proceedings,” says Sauro.

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